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Credit institution investment rules to be tightened
The State Bank of Viet Nam's draft decree that includes strict requirements and conditions for share acquisitions could see mixed responses from foreigners who want to invest in credit institutions.
Under the draft decree, in order to hold 10 per cent of the charter capital of a Vietnamese credit institution, foreign investors must meet certain conditions.
They must have minimum total assets of US$10 billion if they are foreign banks, foreign financial companies or foreign financial leasing companies.
If they are foreign investors in other sectors, they must have a prescribed capital of $1 billion or more in the year preceding the year of registration of share purchases.
They are also required to "have international operation experience and be rated at a stable level or at a high level by international credit rating organisations, and they must show financial resources to purchase shares, which would be determined by independent auditors' financial statements in the year preceding the year of registration of share purchases".
The draft decree also requires that the investors' share acquisitions must help maintain stability of the credit system. They also would be prevented from creating a monopoly or engaging in unfair competition.
If combining the stake of related shareholders to the banks, the draft shows that foreign financial institutions can own a maximum of 30 per cent in their Vietnamese counterparts.
"However, this rate is not alluring enough for foreign investors," said banking expert Nguyen Tri Hieu, explaining that it applied to weak banks, which was even stricter than current regulations.
Hieu advocated to lift the rate to 40 per cent, and the Prime Minister would define specific cases.
"We will have to fulfill the commitments to the World Trade Organisation, the ownership ratio should be gradually lifted."
It would not distort the operation of the system, he added, saying that foreign players needed Vietnamese factors in them to develop.
Meanwhile, under the draft decree, the foreign investor must not violate the laws of the country where the foreign investors are incorporated and their head office is located.
In addition, foreign investors buying shares at Vietnamese credit institutions must be foreign banks, foreign financial companies, or foreign financial leasing firms allowed to operate within the laws of the country where their head offices are located.
The draft decree stipulates that foreign financial companies will be allowed to be strategic investors only in Vietnamese financial companies, and foreign financial leasing companies only at Vietnamese finance leasing firms.
In addition, foreign strategic investors must have international financial and banking experience for at least five years, and have the financial capacity and ability to assist Vietnamese banks in developing banking products and services, raise administration capacity and apply modern technologies.
Their strategic interests must conform to Vietnamese bank development strategies and meet specific criteria set by Vietnamese banks.
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